Malaysian Equities and Economic Landscape Show Signs of Recovery in 2024

Strong Performance by Malaysian Markets

In 2024, Malaysian equities and the national currency displayed remarkable resilience, signaling a sharp recovery in investor sentiment following years of political uncertainty. The FBM KLCI index, which faced considerable headwinds in the past, recorded an impressive annual gain of 12.58%, making it the best performance since 2010. This momentum allowed the market capitalization of Malaysian stocks to surpass RM2 trillion for the first time in May, reflecting strong corporate earnings and renewed foreign inflows, combined with encouraging trade data.

Key players contributing to this rally included prominent firms such as YTL Power International Bhd, Tenaga Nasional Bhd, and CIMB Group Holdings Bhd. As of December 30, the benchmark index was trading at a forward price-to-earnings ratio of 15.7 times, in contrast to its three-year average of 14.3 times, indicating increasing investor confidence and expectations of future growth.

The Malaysian ringgit demonstrated significant strength throughout the year, appreciating by 11.4% to reach an intra-year high of 4.124 against the US dollar in September before adjusting to trade at 4.472, still a year-to-date increase of 2.84%. This rebound in the currency can be attributed not only to improved economic fundamentals but also to Bank Negara Malaysia’s encouragement for domestic businesses to repatriate profits from overseas.

While 2024 marked a significant improvement in market performance, the year began with notable challenges. Early January saw substantial losses in stocks associated with investor Datuk Dr Yu Kuan Chon, leading to rigorous margin financing rules. Despite these initial setbacks, stability was largely restored by February, paving the way for an overall stellar year for Malaysian stocks.

Controversy Surrounds MAHB’s Privatization

In March 2024, Malaysia Airports Holdings Bhd (MAHB) received a controversial 35-year extension to its concession to operate the nation’s airports, extending it to 2069. Shortly thereafter, in May, MAHB disclosed an offer from a consortium led by Khazanah Nasional Bhd and the Employees Provident Fund (EPF) to take the firm private at RM11 per share.

The consortium, which includes Global Infrastructure Partners and the Abu Dhabi Investment Authority, would see Khazanah’s stake in MAHB rise to 40% and EPF’s increase to 30%. The proposal faced public backlash, particularly due to concerns about GIP’s association with BlackRock, which had recently been criticized for its geopolitical stance. However, the government defended the privatization as a strategic move aimed at enhancing MAHB’s potential.

On December 21, MAHB’s independent directors contested the offer, arguing it undervalued the company’s prospects, especially given its financial momentum and growth strategy. In contrast, an independent adviser recommended shareholders accept the offer, citing the long-term suppression of MAHB’s share price. The consortium, however, maintained its position on the RM11 per share offer.

U Mobile and 5G Deployment

The Malaysian Communications and Multimedia Commission (MCMC) made waves in November by selecting U Mobile Sdn Bhd to spearhead the deployment of the country’s second 5G network. This decision prompted discussions about the transparency of the selection process and raised concerns about foreign influence in Malaysia’s telecommunications sector, particularly regarding U Mobile’s largest shareholder, Temasek Holdings from Singapore.

In response to scrutiny, ST Telemedia, a subsidiary of Temasek, announced plans to divest a majority stake to Mawar Setia, headed by influential figures including Tan Sri Vincent Tan. However, this move led to confusion about Temasek’s effective ownership percentage and whether it breached Malaysia’s foreign shareholding limits in telecommunications. Clarifying the situation, ST Telemedia stated its stake was consistent with regulatory disclosures, while sources suggested Temasek’s stake could effectively be as high as 71%.

Sarawak’s Push for Gas Control

In 2024, Sarawak intensified its efforts to control its natural gas resources, advocating for Petroleum Sarawak Bhd (Petros) to assume the role of aggregator for gas supply within the state. Currently, this role is performed by Petronas, Malaysia’s national oil company. Given that Sarawak holds significant gas reserves—constituting 60% of the nation’s total—this shift is viewed as a bid for greater autonomy.

The debate surrounding Sarawak’s request highlights potential implications for Petronas and the federal government, given the latter’s reliance on Petronas for dividends contributing significantly to national revenue. Sarawak’s oil and gas-related revenues surged to RM6 billion in 2023, significantly up from RM2.11 billion in 2019, highlighting the importance of this sector to the state’s economy. Prime Minister Datuk Seri Anwar Ibrahim acknowledged the complexities involved, emphasizing the need for collaboration between state and federal leaders to address the evolving landscape of the oil and gas industry.

Teh Family Sells Stake in LPI Capital

Public Bank Bhd made headlines in October 2024 with its acquisition of a 44.15% stake held by the Teh family in LPI Capital Bhd, valued at RM1.72 billion (RM9.80 per share). This marked the bank’s first major M&A activity since acquiring Hock Hua Bank in 2021, and it triggered a mandatory takeover offer for the remaining shares of LPI Capital, expected to be finalized by early December.

During the announcement, Diona Teh Li Shian, the youngest daughter of the late Tan Sri Teh Hong Piow, revealed plans to decrease the Teh family’s stake in Public Bank from 23.41% to 10%. This strategic decision aligns with the Financial Services Act 2013 that limits individual ownership in financial institutions to 10%. At this threshold, the Teh family would remain a significant shareholder, second only to the EPF.

As of the latest data, Public Bank’s shares have shown little movement, trading around RM4.57, which continues to reflect confidence in the bank’s prospects despite the Teh family reshaping its holdings.

Data Centre Investments Surge in Malaysia

Malaysia is rapidly transforming into a central hub for data center investments, with leading global technology firms such as Amazon Web Services, Microsoft, Google, and Oracle collectively committing over RM75 billion towards establishing state-of-the-art data centers in the country. This influx of investment is expected to have a significant impact on land deals and the broader technological infrastructure across Malaysia, reinforcing the nation’s aspirations to position itself as a leader in the digital economy.

As Malaysia continues to develop its capabilities in hosting data centers, the government and private sector stakeholders are poised to capitalize on these advancements while fostering a competitive environment that attracts further investments in this burgeoning industry.

In summary, 2024 marks a pivotal year for Malaysia, characterized by strengthening markets, notable corporate actions, and evolving regulatory environments, setting the stage for continued economic growth.